- Pound (GBP) Volatility Worsens – Price of insuring against movement hits seven-year-high
- Euro (EUR) Sturdies on Risk-Off Market – Mixed appeal of US Dollar boosts Euro
- Forecast: UK CPI Today – But will investors react to it as the EU Referendum nears?
- Forecast: Eurozone Economic Calendar Light – Industrial production on Tuesday
Pound Gains as UK Jobs Figures Impress
The Pound Euro exchange rate rallied on Wednesday as the UK’s unemployment rate declined unexpectedly and average earnings failed to show the decline anticipated by economists.
GBP/EUR advanced 0.4% on the day’s opening levels, keeping the currency well above the 1.26 mark.
Economist Samuel Tombs said the following: ‘The continued rise in employment, despite heightened uncertainty caused by the EU referendum, shows that firms are shielding consumers from the slowdown in economic activity. The three-month average level of employment rose by 55K, or 0.2%, between January and April.’
However, if the Bank of England (BoE) adopts a dovish tone in tomorrow’s gathering and the meeting minutes focus on the headwinds facing the UK economy, the Pound could fall back against peers like the Euro and US Dollar as the weekend approaches.
(Previously updated 08:00 15/06/2016)
UK Employment Data Ahead – GBP Could Fall Back to 2-Month Low
Although the Pound edged slightly higher against the Euro as the European session opened on Wednesday, the British asset could swiftly drop back to its recent two-month low against the common currency if the UK’s latest job figures fall short.
Average earnings are believed to have fallen, a result which is unlikely to lend the Pound much support.
Before the data was published GBP/EUR was trending in the region of 1.2637.
(Previously updated 16:50 14/06/2016)
Pound Sterling (GBP) Creeps Higher after CPI Data
With the UK’s inflation report unexpectedly showing an unchanged rate of annual consumer price gains, the Pound was initially left trending statically against the Euro.
Year-on-year non core inflation printed at 0.3%, unchanged from the result recorded in April.
Core consumer prices also held at 1.2% instead of accelerating to 1.3%.
However, as the European session continued the Pound pushed away from its recent two-month low against the Euro and advanced to 1.2626.
Whether or not Sterling is able to hold this higher ground with the latest EU referendum polls showing increased support for the ‘Leave’ camp remains to be seen.
Tomorrow’s UK employment data is also likely to have an impact on Pound Sterling to Euro (GBP/EUR) exchange rate movement.
Average earnings are forecast to decline and if that proves to be the case it would put Sterling under additional pressure.
(Previously updated 08:30 14/06/2016)
Could UK CPI Give GBP a Boost?
The Pound to Euro exchange rate continued trending in the region of a two-month low ahead of the release of the UK’s Consumer Price Index.
If UK inflation rises as expected GBP/EUR could edge slightly higher, but with the EU referendum in the spotlight Pound gains may be fairly limited.
Before the CPI was published Pound/Euro was achieving 1.2567.
(Previously updated 17:10 13/06/2016)
Pound Trending Lower with 10 Days to Go
The downtrend in the Pound Sterling to Euro (GBP/EUR) exchange rate continued on Monday, with the pairing shedding almost 1% and hitting a low of 1.2533.
While UK data is lacking today, speeches from two Eurozone officials could have an impact on the GBP/EUR pairing as the European session continues.
A recent poll conducted by ORB saw 55% of respondents voting to exit the European Union.
According to The Independent:
‘The results will heighten fears in the Remain campaign that it is losing ground among Labour supporters, who are seen as critical to securing victory for it. According to ORB, 56 per cent of people who voted for Labour at last year’s general election now back Remain when turnout is taken into account, but a dangerously high 44 per cent support Leave. Only 38 per cent of Tory voters endorse David Cameron’s stance by backing Remain, while 62 per cent support Leave.’
Although subsequent polls have put the result as being too close to call, investors appear to be putting a lot of stock in the leave lead, with the Pound struggling against almost all of its most traded currency counterparts over the course of Monday’s European session.
Further polls are likely to be published over the next few days. If any of them put the ‘Remain’ camp ahead the Pound could derive support and enjoy a much needed boost against rivals like the Euro and US Dollar.
(Previously updated 08:00 13/06/2016)
The Pound Sterling to Euro (GBP/EUR) exchange rate fluctuated during last week’s trade session as Sterling’s volatility made it increasingly unappealing to investors, while the Euro held its ground due to a weak US Dollar and decent Eurozone data.
GBP/EUR briefly touched a monthly low of 1.2659 last Monday, followed by a weekly high of 1.2853 on Tuesday as ‘Brexit’ bets lightened. The pair largely fluctuated throughout the week however, as it failed to sustain any substantial gains or losses.
Pound (GBP) Appeal Drops as Currency Deemed Too Risky
Sterling volatility surged towards new highs last week as the price of insuring against the currency’s fluctuations soared to its highest level in seven years.
Despite news that ‘Brexit’ bets slipped slightly last week, last Thursday marked just two weeks until the key EU referendum vote and the Pound remains under significant pressure.
Data had also been optimistic, with Thursday’s UK trade balance updates revealing that deficits had narrowed by more than expected.
Friday’s construction output report also exceeded expectations, improving from -3.6% to 2.5% month-on-month, and narrowing from -4.5% to -3.7% year-on-year.
These reports, alongside news that consumer inflation expectations had risen from 1.8% to 2.0%, did little to restore faith in the shaky Pound, however.
Euro (EUR) Holds Ground on Solid Data, Risk-Off Trade
While the Eurozone’s economy remained relatively unhealthy, with European Central Bank (ECB) President Mario Draghi issuing yet more warnings during Thursday’s session, the Euro remained relatively appealing last week due to mixed sentiment towards the US Dollar.
Draghi slightly spooked markets with his speech, where he took the opportunity to once again remind Eurozone politicians and financial ministers that their assistance is necessary in order for the economy to properly recover.
‘There are many understandable political reasons to delay structural reform, but there are few good economic ones. The cost of delay is simply too high.
Given the interactions between policies that I have described, it is in everyone’s interest that the various strands of policy buttress each other – if only because that would shorten the time it takes for each to produce its effects. And that would mean that we can bring growth back to potential before potential itself becomes damaged.’
The central bank president has taken up this line of speech multiple times in recent months, possibly indicating that his pleas have thus far fallen on deaf ears.
However, with his latest warning comes the hint that failure to act could lead to further damage, damage that would exhaust an economy still attempting to recover from a debt crisis.
The Euro held its ground despite his warnings. Solid Eurozone data released throughout the week’s relatively quiet economic calendar may have bolstered Euro support.
Thursday saw the release of the latest German trade report, which saw the trade surplus slipping less than forecast. German exports reflected this by printing at 0.0% rather than contracting by -0.9% as expected.
Friday’s session followed with a German Consumer Price Index (CPI) report. These final May scores met preliminary figures of 0.3% month-on-month and 0.1% year-on-year.
Pound Sterling (GBP) to Euro (EUR) Exchange Rate Forecast: Will UK Inflation Influence GBP/EUR?
In the final full week before the EU referendum vote, many investors are likely to be extremely wary of the Pound. With volatility likely to worsen further, caution would be wise.
Key British data is due for release throughout the week, but it is uncertain if the reports will influence the Pound’s movement considerably so close to the pivotal referendum.
Tuesday will see the release of May’s UK Consumer Price Index (CPI) scores, which are expected to improve from 0.1% to 0.3% month-on-month and 0.3% to 0.4% year-on-year. Labour figures are due for release on Wednesday.
Perhaps more vitally, Thursday will see the Bank of England (BoE) holding its final pre-referendum policy meeting. This notably takes place exactly one week before the vote itself, and may see the central bank hinting at what action it could take in the event of a ‘Brexit’.
The Eurozone’s upcoming economic calendar is set to be relatively quiet. Tuesday sees the release of Eurozone industrial data, followed by May’s final CPI figures later in the week.
Investors are likely to show more faith in the Euro than the Pound in the coming week. However, if risk sentiment rises the Pound may react, especially if polls indicate strengthening support for the ‘Remain’ camp.